Bikaner-based Bikaji Foods International Ltd has not
only emerged unscathed from the Centre’s
demonetisation move, but has beaten the industry
average with 11% revenue growth in 2016-17.

In comparison, the FMCG sector was hit by poor
consumer demand and massive destocking in retail
and wholesale channels following the sucking out of
high-value currency notes.

Now, the snack maker is seeking to tingle the taste
buds of a new set of consumers beyond Rajasthan,
its home turf, besides Bihar and Assam. However, the
expansion plan is likely to ride on its proposed initial
public offering that may mop up Rs 600-700 crore,
and may involve a stake sale by private equity
investor Lighthouse Funds.

The leading FMCG player, which sells its snacks, such
as bhujia, papad, namkeen and sweets, under the
Bikaji brand, aims to achieve 25% in revenue growth
in 2017-18.

Promoted by Shiv Ratan Agarwal, Bikaji Foods,
formerly Shivdeep Industries Ltd, was established in
1986 as a partnership concern. In 1995, it pivoted
into a limited company. At present, it is run by the
founder’s son Deepak, who is also the joint managing
director of the company.

However, Bikaji Foods has its roots in another
snacking major, the Haldiram Group. Shiv Ratan
Agarwal was the grandson of Gangabhisan ‘Haldiram’
Bhujiawala, who started his business from a small
shop in Bikaner in the 1930s. Nagpur-headquartered
Haldiram Foods International Pvt. Ltd was founded
later.

Bikaji Foods used to sell its products under the
Haldiram brand till 1993. Ensuing a legal battle over
the use of the trademark, the family split into smaller
groups, and established different centres to avoid
turf war within India and in overseas markets.

Fundraising

In its first round of private equity investment, Bikaji
Foods had raised $15 million (Rs 90 crore) from
Lighthouse Advisors in March 2014. As part of the
deal, the mid-market-focused private equity firm had
picked up a 12.5% stake
(https://www.vccircle.com/lighthouse-picks-125-
snacks-maker-bikaji-foods-15m/) in the company.

The investment had valued the company at $ 117
million, or Rs 720 crore, according to VCCEdge, the
data research platform of News Corp VCCircle.

Naveen Gupta, the then CMO at Bikaji Foods had told
VCCircle that the proceeds would be used to expand
its distribution to markets outside North India. “We
are not in any rush to raise further capital and are capable of funding our expansion plans through
internal accruals. We will be exploring an IPO
opportunity as an when we feel the need.”

However, VCCircle had recently reported that
Lighthouse Advisors is finalising plans for Bikaji
Foods’ public offering and may divest its stake
(https://www.vccircle.com/exclusive-lighthouse-
backed-bikaji-foods-firming-up-ipo-plans/) in the
company during the public float.

Financials and peers

The company’s total income stood at Rs 612.6 crore
in 2016-17, up 11% from Rs 552.6 crore in the
preceding fiscal year. It posted net profit of Rs 43.7
crore compared with Rs 41 crore during the period
under consideration.

The company’s revenue has grown 1.5 times from Rs
401 crore in 2012-13, when Lighthouse had infused
money into Bikaji Foods, while its net profit has
almost doubled from Rs 24.8 crore in the last four
fiscal years.

Even in the face of the 8 November, 2016,
demonetisation move, the company witnessed
improved sales in the fourth quarter of 2016-17, and is hopeful to clock revenue growth of around 25% in
2017-18.

It has made capital investment of Rs 223 crore during
the year ended March 2017. It has also set up a
manufacturing plant at Karni industrial area with a
production capacity of 250 tonnes of snacks per day.

This, at a time, when most of its competitors saw
decline in profits and revenue growth. Bikaji Foods
competes with Haldiram’s, Balaji Wafers, Prataap
Snacks, Bikanervala and DFM Foods, besides MNCs
such as PepsiCo.

Haldiram has three distinct areas of operations –
while Haldiram Snacks and Ethnic Foods caters to
northern states, Nagpur-based Haldiram Foods
International operates in western and southern
markets. Haldiram Bhujiawala runs its snacks
business in the eastern region.

Though the latest financials for Haldiram Foods
International and Haldiram Snacks and Ethnic Foods
are not available, Haldiram Bhujiawala had witnessed
53% dip in net profit during 2016-17, according to the
company’s RoC filings.

Similarly, listed peers such as DFM Foods and Prataap
Snacks had also seen its profits slide by 12% and
63%, respectively, during the period.

What the future holds

According to a recent report by market research firm
Technopack, the branded snacks market in India is
estimated to be worth Rs 10,000 crore ($1.68 billion),
and is projected to grow at a compounded annual
growth rate of 15-18% over the next few years.

According to industry observers, these are
momentous times with many structural changes
happening in legislation, economy and business
environment. With the onset of GST, more and more
players in the unorganised sector are coming into the
formal organised economy, and is expected to
benefit the players in the organised sector, such as
Bikaji Foods.

“Apart from the transition of unorganised players,
because of the unified tax structure the movement of
stock has also become seamless and is helping us
expanding other geographies as well,” said Gupta.
“Distribution remains the key for any retail brand,
and strengthening our distribution network and
expanding our retail reach are the focus areas.”

“Now, we are focusing on exploring new geographies.
The company already has a strong hold in Rajasthan,
Bihar, Assam and Haryana. We are expanding our
presence in UP, Punjab, Odisha, Madhya Pradesh and
Chhattisgarh. We have a cosmetic presence in
Southern part of India as well, but we are not very
keen on expanding there, at-least not in the next two
or three years,” he said.

The company is also looking to expand its offerings
both in ethnic and western snacks segments, besides
healthier snacking options. It is also looking forward
to ramp up its presence in international markets.

Exports currently contribute around 4% to Bikaji
Foods’ overall revenue, but it is likely to increase
substantially over the next two or three years. In last
three years, It has already beefed up its presence
across 14 countries from just three. “Our frozen food
segment, which comprises 40% of our exports, has
got good response overseas,” said Gupta.

It has also entered South Africa and is looking to
expand in the US, West Asia, Indonesia and the UK.
“We are getting a lot of references through our
private equity partner for overseas expansion,” Gupta
said.